Category Archives: Education

Just My 2 Cents on Being Unemployed

Hello all and my apologies for such a long hiatus. If you have read About the Rabidwhole, than you can see that my life’s work, as it is for all I hope, is to set myself up to be able to live independent of The Clock, the Rat-race, a J.O.B – (which BTW on Wall Street means: Just Over Broke,) – but whatever euphemism you have for working day after day to the toot of someone else’s horn, that is exactly what I’m trying to avoid. There have been some nice developments in many areas which I am extremely thankful for, and just like a garden or even a newborn baby, Inspired Thought must be cultivated, nurtured, and most importantly actively engaged.

Along those same lines, while people are still losing their jobs as the Financial Earthquake continues to send aftershocks through different industries and markets throughout the world, more and more people are in position to actually look at themselves and see past their own résumés. More and more people are putting those Arts degrees to better use in their communities or at home and on the internet, than they were in the Customer Service Department, or in the stockroom, or at the front desk. More and more people are remembering forgotten skills, likes, and hobbies from their childhood or teenage years. Indeed, getting fired from your j.o.b. is quite liberating.

First of all, no matter what job you have, if you’re working for an hourly wage, the only way you make more money is to give up more hours, more time, more of Your Life to your company. All the while, that time that you are giving up allows your “bosses” to keep more and more of their time, do more and more with their lives, while you put more and more money straight into their pockets. This leads to the type of situation you see all the time, where you are working for someone whom you feel is an absolute and utter moron, and you are flabbergasted at how this company even stays in business with someone like this on the payroll, let alone in a managerial or even executive position. Well, he doesn’t have to be smart; he just needs to be smart enough to hire YOU. You’re a hard worker, he’s a lazy ass. You anticipate problems and solutions, he creates them. So, it only makes sense that the more you are there – working, slaving to The Clock trying to make your money – the less he’s there fucking shit up, and the more the business thrives. What does he get? A boatload of money (maybe even a boat.) What do you get? Time and a half…maybe a raise after 5 or 6 years, or even worse, you get overlooked for that raise…and stay in the same position. Not feelin’ it.

I say all this to say, that I know there is a mass of individuals out there that think just like this, that have presumably been recently alleviated of the aforementioned burden in the form of a pink slip. And even with all the complaining, it can be a bit daunting being unemployed for the first time in a long time. So, as someone with more than a few gaps in my own résumé, as well as someone who is independent/business-minded, here’s my 2 cents regarding what to do with that newly acquired time.

Newly Acquired Life is how that time should be perceived. Ever go to the park during your “lunch break” and see people there seemingly with no care in the world, and no job, so you wonder how they make money, or if they don’t, how the hell can they be so care free in the park at 2 in the afternoon on a Wednesday? Now you can be one of those people, and let me tell you, it feels great. FYI, right after you don’t have a j.o.b. anymore is of course the best time to take this “carefree” time in the park or walking around your neighborhood, whatever you choose to do. Theoretically, you will have some savings to be able to hold you over without a job for at least a little while, before bills and creditors, make you anxious about receiving income, so you can just enjoy the relaxing feeling of freedom.

You Don’t Need A J.O.B to create income. Living in NYC, every year there’s some article in the Post or in the Daily News about some panhandler on the trains that makes $100,000 a year asking people for change. I’m not saying go out and be a bum for a living, I’m simply saying that your own innovation and creativity can bring you more money than a traditional job working for someone else, even if it’s in a great industry. I know a lot of people in the IT industry – web programmers and developers, systems architects and engineers, even just kids that have always messed with electronics taking things apart and putting it back together – that were working for great companies and organizations, making $80,$90K a year. Now they’re doing their own thing, running their own sole proprietorships making money for no one else but themselves, and loving it!

But you don’t have to be an IT guru or even work in IT either, or any other already-lucrative industry to be successful making money independently. I know people that were working in stockrooms a year ago that are now getting grants for their own artistic or community oriented programs, former cashiers that are now selling their own homemade wares, or art, or doing hair out of their apartments, or writing ebooks, that are making just as much if not more than they were when they had their previous “occupations.”

The bottom line is, there are a million and one ways to make money, and bring in income independently and be able to make a good living, spending your time and your Life the way you decide. Do you knit? do you garden and know how to grow fresh fruit and vegetables? do you paint? do you sew? can you repair electronics? do you do photography? etc., etc., etc.

Don’t Sit Still! You get stuck like that. Period.

Remember, Education Never Stops! I don’t know anyone that knows everything. There’s always something you could be learning. Current events, worldly issues, a different culture, welding, woodcutting, carpentry, sculpture, dance, Economics, accounting, book keeping; how many things can you learn that might give you a feeling of pleasure and accomplishment in some way or help you run a business?

 

Finally, here are 3 resources, among millions, on the internet that I think are pretty phenomenal for finding jobs, or projects if you will, that can become great sources of income, or at least help you get a job in an industry interests you more than the one from which you may have just come, or the one you are in (if you still have a job, but perhaps feel the “heat” coming.)

Etsy.com. Already a pretty popular site, but if you don’t already know, this is a site where if you make a lot of your own jewelry, clothes, blankets, artwork, anything that you can make – even pastries and other baked goods that are good to travel through the mail – you can sell it to a much larger audience on this site.

Elance.com. This website is like an online supermarket of freelance jobs. Writing jobs, art jobs, all types of IT jobs, even online secretarial jobs, (they’re called virtual secretaries and I still don’t know too much about it, but I’m certainly trying to learn more.) Ever wonder how certain ads on sites like craigslist get posted over and over and over again? It’s because someone is willing to pay you to do it. For someone like myself, with writing and artistic talent, that hasn’t been published anywhere, you can get small jobs, make some cash, and work on building your portfolio. That goes for music artists as well, as there are music jobs on the site too. How the site works seems a little complicated at first, but if you’re as serious as I am about making a living independently and making your own time, your own life, it’s certainly an option worth exploring.

Twitter.com. Now, I know a lot of people are going to be turned off to the rest of this post just for having to hear about twitter again. There’s not much left, so bear with me, but I used to be that way too…until I actually signed up. I won’t even get into the reason I signed up for twitter, but once I was in, I have to admit I was hooked, and I still am. Let’s just say you live in Alaska and you’re looking for another j.o.b. because as it happens to all of us, you need that paycheck. You can log into twitter and search “[Your city] Alaska jobs,” and voila, anyone on twitter that has posted a link to a job in Alaska (i.e., AnchrageJobAds or JobsAnchorage) comes up in your search. Not only do you now have a list of jobs in your area, but each post is time-stamped so you know when it was posted. Search the industry in which you work and your area, or the industry in which you’d like to work, and see what you get. (Just put in “Jobs” and see what you get.)

I have to point out that aside from all this job info, twitter really is an unbelievable resource for being on top of the latest information in many different arenas. If news stories like the bombings in Indonesia are breaking faster on twitter than through any other mode of receiving information, consider what else it is possible to be on top of before most other people, like a job opening, by being on twitter. That’s all I’m gonna say about it.

 

At the end of the day, and at the end of my Life, I don’t want to look back and see almost half of all the hours that make up my time spent on this Earth were spent lining some jerk-off’s pockets, while I stressed myself out to be “just making it,” and can only afford to leave my family and kids just over broke savings.

 

“If there is no struggle, there is no progress.” –Frederick Douglass

Required Reading for All Investors

President Obama just finished speaking about the economy from Nellis Air Force Base in Las Vegas, NV. Very positive, uplifting, well-laid speech – something we can finally say about our President again. If you don’t know how the markets have been responding to our President, then you probably don’t know what’s been going on in the markets in general. This post would be a novel if i tried to go over just what’s happened this week, and Monday was a Holiday. So, thankfully here’s an article that kind of sums everything up nicely and in such a simple manner, my 10 year old little brother might be able to beat the average investment manager after seeing this. I like how the article was published kind of in tandem with The President’s speech today. Enjoy!

Oh, just in case you didn’t know, the 20-day simple moving average on the Nasdaq crossed over the 200 yesterday. Let’s see if that GDP number on Friday can help the Dow and S&P catch up. Happy Trading.

Great pic from The Huffington Post

Great pic from The Huffington Post

A General Explanation of Short Selling, Naked Short Selling, and Illegal Naked Short Selling

What does it mean to sell short?

Selling a stock short is the exact opposite of buying a stock. When you buy stock, it is typically because you think the stock is rising and you will therefore be able to sell that stock at a later date and at a higher price, profiting from the difference between your low purchase price and subsequent high sale price. When selling a stock short, you still profit in this same way, accept the “order of operations” is reversed. Instead of achieving the low purchase price first, by buying, you “open” or begin a short sale transaction by achieving your high sale price first. You do this by selling shares of a stock that you do not actually own. Why would you sell shares of a stock you don’t own? Well instead of believing that this particular stock is going up, you believe the stock is going to go down.

Strictly as a hypothetical: maybe Google (NYSE:GOOG) at $400 per share is too high a price in your eyes. At that point, you would want to sell shares of GOOG while it’s trading at or around $400. If you are correct, and the overall investment community agrees that $400 is a high price for Google, the stock will be sold off, and go down. In order to “close” or end your short sale transaction with profits, you would have to buy shares of GOOG at the lower price, say when Google is at $320 per share, making your profit (the difference between your high sale price and subsequent low purchase price) $80 per share or roughly 20%. (This example reflects no personal bias on the share price of Google now or at $400 per share, and is purely for argument’s sake.)

Image from the Washington Post

Image from the Washington Post

Many people argue that short selling as a whole should be illegal, because in essence you are betting on a stock falling, which of course is never a good sign for the people working at that company and the prospect of their continued progress. As such, making money from a drop in that stock is akin to benefitting from the suffering of other people. Despite the social and moral implications of this view, there’s nothing illegal about it, and at the end of the day, that is how life goes. People profit from the misery of others all the time. Charles Darwin isn’t heralded for being a nice guy that was interested in science. “Survival of the Fittest” plays out in all environments no matter how large or small. Short-selling is simply the opposite side of a two headed coin. At some point, all stocks trade at a market price that is higher than the company’s true valuation. Short-selling is a function of the markets that helps in achieving parity between these two prices when sentiment around a stock and its share price might be inflated or unjustified.

Settlement

The problem with short-selling, lies within the timeframe allotted for settling a short sale transaction, and failure to do so. When buying equities, the average timeframe between the actual date of your purchase, (Trade Date) and the actual settlement of that purchase transaction, (Settlement Date) is 3 business days. This is denoted as T+3. (*This timeframe can fluctuate depending on the markets in which the equities are purchased or the type of equities in question. Money market mutual funds and options on equities settle T+1) So, when you buy stock, you have 3 days to settle the trade and put the money in your trading account if it’s not already there.

However, when shorting stock, you need to deliver the shares, not cash, to the buyer on the other end of your sale, in order to settle the transaction. Since a short-seller doesn’t own the shares being sold, they need to borrow those shares from a third party, which I will get to very shortly. The borrowed shares will go to the buyer on the other end of the short sale transaction on Settlement Date, (T+3). Although this will settle the short sale, it doesn’t “close,” or end, the short-sellers obligations in this transaction. At a later date, hopefully after the stock has dropped, the short-seller can buy the shares at the lower price, and replace the previously borrowed shares thereby covering or closing the trade, with the short-seller pocketing the difference and having no other obligations.

Borrowing

Because borrowing is inherently involved with any short transaction, all shorting is done using “Margin“, which is a whole other beast in itself. Basically, using “margin” is borrowing – usually from the brokerage firm where your account is held – an amount of money that is up to the equivalent of what you deposited in the account. So, if you have $10,000 cash in an account, you could use margin, and leverage that money 100% to give yourself $20,000 worth of buying power – $10,000 borrowed from the brokerage firm against your $10,000 in collateral.

As an aside, let me just say that in my opinion, no individual investor should ever use margin, ever! It’s the equivalent of buying stock with your credit card, or with a bookie the way you place sports bets, and that’s certainly high on the list of the dumbest things anyone could ever do.

However, since short sellers are using margin, they don’t always have to borrow 100% of the amount of shares they sold short in order to settle, or deliver, on the short sale transaction. 50% could be backed by the investors’ money (and shares that the bank bought backed by that money), while the other 50% could be backed by margin (shares the bank bought with their own money, but lent to you on margin). For example, if you have a total short position of $10,000 worth of stock, $5000 worth of shares must have either already been borrowed, or the cash to make that purchase must be sitting and ready in your account, while the other $5000 worth is paid for with margin against your $5000. This satisfies the average margin requirements, and gives you the full amount of shares being sold short which goes to the buyer on the other end of the transaction, for settlement. However, you still owe the bank “replacement shares” for the shares they borrowed on your behalf to settle the short sale. The time frame you have to essentially “replace” those borrowed shares with the bank is known as the “Days to Cover.”

Covering and Closing

Buyers have 3 days, on average, to come up with the cash as collateral for their purchases. Short-sellers have the same amount of time to deliver borrowed shares as collateral for their sales. How long does a short seller have to replace those borrowed shares that were used as collateral for their short sales? More complications: The timeframe for “covering,” or closing, a short-sale is determined by dividing the average daily volume of a stock, by the amount of short interest on that stock. For example, if there are 20,000,000 shares of XYZ Inc. being sold short, and the average daily volume of XYZ Inc. is 1,000,000, then a short-seller has 20 “days to cover,” (20,000,000/1,000,000.) This is just an example, as short interest and average daily volume can vary dramatically on all stocks, so some stocks afford 40 days to cover, while others only afford 5. It is more important to understand the relationship between the three values. The lower average volume is in comparison to short interest, the more days you will have to cover a short sale. But the more time you have to cover, the more time the stock has to run against you, which would cause a “short squeeze.” So, short-sellers seek to short companies that allow fewer days to cover rather than more.

Naked Short Selling

When an investor sells shares short without borrowing the shares first, it is a “naked” short sale. The seller does not have the collateral, (the shares,) to satisfy the sale, nor does he have any guarantee that the shares will be available by settlement date, and is therefore “naked.” Sometimes there are not a lot of shares available for borrowing, which can happen with illiquid stocks. Other times, there aren’t too many “lenders,” or lending institutions from which you (or more likely your brokerage firm on behalf of you) can borrow the shares. If the shares are not borrowed, or your short sale is not “covered” by settlement date, this would cause a “failure to deliver” (FTD). Failures to deliver occur all the time, on both the buy-side and the sell-side, but aren’t extremely prevalent as a whole. Maybe, in an illiquid market, it took a few more days to locate all of the shares to borrow in order to satisfy your entire position. Maybe it took a little more time overall to locate an institution where borrowing was even available. (*It should also be mentioned that there are various extensions that both buyers and sellers can receive if they do not have sufficient collateral by settlement date. But just like being late with your credit card payments, it is a “red flag” against you if you take an extension, and there is a limited number you are allowed to take before you are “cut off,” and restricted in some way.)

Just because an FTD occurs doesn’t mean that it was due to illegal naked short selling, it doesn’t even mean it was due to selling at all. But, FTD’s can be a sign that there could be a “problem”, a manipulation going on in some way, and yet, aside from it being electronically generated in a “failure to deliver” report that some intern at the SEC most likely glances over or completely overlooks, nothing really happens. The short position remains open and legitimate, as if it actually had been settled, until the time that the short seller actually decides to deliver the shares, or covers the transaction by buying the shares in the market.

So, if I was an underhanded individual looking to profit from illegal naked short-selling, the mindset would be: “What are the chances of this stock dropping, and my being able to cover this short sale without ever borrowing the shares? What if the stock keeps dropping and I keep adding to my short position, thereby increasing short interest, and continually extending the amount of time I have to ‘cover,’ all the while forgetting about ‘delivery on settlement’ altogether? Well then as long as I continue to maintain a good, large-sized short position, and the stock keeps dropping, I can potentially forget about ever having to borrow shares for settlement, and just focus on covering when the stock actually begins to show some sign of life and real upward momentum. The SEC doesn’t even really do anything about FTD’s anyway.”

“Illegal” or “Abusive” Naked Short Selling

Thinking in the manner described above is what leads to the type of naked short-selling that is illegal, where the seller has no intention of ever delivering the shares to the buyer at the time of settlement. The fear is that short-sellers – specifically institutions like hedge funds that specialize in shorting stocks and have enough cash behind them to manipulate, say a low-priced, low volume stock – could continually short a company, no matter how good or even flat the stock may be performing, inundating the tape with sell orders, and driving the stock price down hard and fast. When short sellers fail to deliver, it creates a set of “phantom shares” that are hypothetically being sold, but of course these phantom shares won’t be really sold short until “the money changes hands,” or in this case until the shares change hands, and those transactions actually settle. Until then, the shares being sold short, that haven’t actually been delivered upon settlement, are in a type of market-purgatory where they are neither sold nor bought. (Think of the train station Neo is trapped in at the beginning of the movie, Matrix Revolutions. That is where these shares are.)

Nonetheless, the real perception, which you could get by simply reading the tape of course, or paying attention to the increases you would see in short-interest, is that these phantom shares, are actually being sold! “Sell” orders are going off! That puts real selling pressure on the stock, dropping the price like a text book falling from the Empire State Building. If buyers come in with heavy volume and the stock should happen to rise, bucking the short-selling trend, abusive short-sellers will only add and add to their short positions, and put more selling pressure on the stock, exponentially engorging the lot of phantom shares, with no regard for settlement whatsoever!

 

The SEC’s dilemma comes in the form of regulating this type of illegal naked short-selling without hindering or penalizing those short-sellers that follow the rules, settle on time, cover on time, and are not abusive. Even if an investor or investment firm had one or two FTD’s on their record, if these infractions were spread throughout a reasonable amount of time, it could be reasonably overlooked with nothing more than a warning. In the technologically advanced world we live in, compared to when these rules were originally conceived, matching an actual short-sale to an actual buyer to then record an actual failure to deliver is very hard, thus conducting this activity illegally while slipping under the radar is much easier. Electronically recording failures to deliver is probably pretty easy, but it still requires human intelligence, desire, and expertise, aside from time and manpower, to comb through that information to see which FTD’s actually came from naked short-selling, and then continue to track, follow up and report progress on, or penalize them as they occur, until the time they all finally settle.

The uptick rule and various other proposals being discussed by Congress and other Financial Authorities right now are the market tools with which we as a society are most familiar with using in the dissuasion of illegal naked short selling. Regardless of what critics of the uptick rule might say, the mechanism can at least temper the downward pressure a stock can experience when being bombarded with heavy short interest. Even with the uptick rule in place, the old adage that stocks “sure drop a lot faster than they rise,” still rings true, so short-sellers should still be able to prosper with some sort of uptick rule or circuit breaker in place, as they did during the 70 years prior to 2007 when the uptick rule was abolished. I would hope that regardless of one’s personal position on the provisions recently adopted by the SEC regarding the uptick rule, that it is easy to see that without such a mechanism in place, acting as sort of a filter for legitimate market activity on the short side, bad practices would be harder to punish and even differentiate from best practices, or just okay practices that follow the rules by the bare minimum.

The Power of A Dollar

What a ride it’s been for the past couple of weeks. There have been a number of measures taken by the Fed, the Treasury, the Administration, and Congress to prop up our nation’s economy. There has been even more criticism from all angles. I myself am even skeptical of many of the recent moves made by our Government in response to this crisis. Despite that, the big picture for investors is this: more money being pumped into this market to stabilize it, along with a few “better-than-expected” economic indicators showing that at the very least the decline is subsiding, certainly creates a nice environment for making some solid profits!

Here are the numbers:

On Monday March 9th, the low on the Dow Jones was 6440 according to yahoo.finance.

A little over two weeks later, on Thursday March 26th, the Dow hit a high of 7969.

That’s a move of 23.7% from trough to peak, in just over a payment cycle!

Hypothetically, if you invested $100 in a stock that moved directly in-line with the market, that $100 was worth $123.70…on Thursday, March 26th…at the peak of the day.

Of course, unless you sold at that very moment, it would now be worth less, but still roughly $116 today, with the market around 7500. Not bad.

Now, here’s the kicker. I bet there are a lot of investors that were sitting on some nice profits this past Friday, when a slew of reports hit the news regarding negative sentiment for upcoming earnings and economic indicators for the first quarter of ’09, along with some very public “infighting” at AIG, all stirred the pot of selling pressure. I took profits on some of my investments, but I bet there is an extremely large number of investors out there that didn’t. Even with today’s blood-letting of 254 points on the Dow, there are still a ton of investors that are still up 16% on investments made within the last few weeks, but still will not sell anytime soon. They would rather let those profits disappear in the hope or belief that given time, the investment will give them another opportunity to net an even higher return.

My philosophy is, if you believe the stock will not only go up again (after it moves lower from where it is now), but that it will rise higher than this previous peak on the next go round, why not book the profits you have, (16%) and then buy back in when you think this current downward move is coming to an end? Following my philosophy and still using the $100 hypothetical from earlier, you would have $116 after selling your investment today. If over the next 2 weeks, the market went back to 6500-6440 (to test the “bottom”) and you got back into your hypothetical investment (which in our example moves directly in-line with the market), now you’d be reinvesting $116 instead of just holding the original $100. If, following that re-investment, the market and your stock proceeded to make the same move upward, (another 23.7%,) back to these past highs, well then at that point, your original $100 that you booked profits on and reinvested at $116, is now worth about $143…so far! The guy that held on the whole time and never sold for the re-buy on the dip, he’s back to his original $100 being worth $123.70…if he sells tomorrow.

Some might say that this philosophy would be akin to trying to “time the market” and “no one can accurately time the market over the short term.” This is a statement I wholeheartedly disagree with. On a very basic level, if this were true, then a logical conclusion might also be that no one could accurately make money in the market since doing so directly involves timing. No matter what direction the general market is moving, all good situations have bad times. If you get in at a bad time, you’re done. Therefore, timing is the most important thing when it comes to making any investment. The intent behind any and all research done and reports read about investments is to determine whether or not it is the right time to buy, sell, or continuing holding the asset. To say you can’t “time” the market accurately demonstrates a defeatist attitude, which typically leads to the self-fulfilling prophecy of most investors not making money with their market ventures despite their best efforts, but if it were true, it would also mean that any and all research done on investments is all for naught since it won’t help anyone “time the market accurately.” Obviously, this is not true, so the former must not be true either.

In order to be a successful investor, especially now, you need to know, understand, and believe that not only is it possible to “time the market” over the short-term, it is fairly easy. Let me say that again, because it goes against everything that the perceived “Wall Street wizards” want you to believe and have told you since the markets were created. It is easy to time the market over the short-term! Money managers have lied to us from the beginning of finance and commerce about this fact for a simple reason. If society and therefore the investment community actually knew how easy it was to track, follow, and predict the movements of your investments, they wouldn’t need investment advisors and those guys wouldn’t make any money. They wouldn’t even have jobs. We need to believe that it is hard to make money in the markets in order for us to believe that we will not be able to do it without their help. That way, they can charge us just for talking to them, no matter how good or bad their advice!

What do you actually pay your investment advisor for? Being a former registered representative, I know exactly what it is, and what your advisor wants you to believe it is, and let me tell you, those are two very different things. He wants you to believe you pay him mainly for his speed and availability of financial information, and for the resources his organization may boast having access to, such as analysis, which he wants you to believe you certainly cannot do on your own without the “training,” “experience,” and “expertise” he or his colleagues may possess. Well, if the current state of our economy is the result of their “training, experience, and expertise,” I think it’s fairly safe to say we certainly could have lost our own money – and probably would have had a lot more fun doing it our way at that.

No, what you actually pay a broker for is simply to gain access to the markets. Your broker is in direct competition with TD Ameritrade (my personal choice,) Etrade, and all the other onlinebrokerage companies, because with online firms, you pay a low flat-rate commission per transaction, and have general access to the same information your broker holds over your head as “unattainable, unless you’re on Wall Street.” There are also extra informational services offered through most online trading firms that can be earned through consistent trading, or you can pay for it. Regardless, the only real way for you to get your money from your bank account and into shares of a company that trades on the market is by going through an investment or brokerage firm. Either you make your own trades, or you pay someone else at the firm to manage your portfolio, and do all the work that goes along with it, for you. It should be obvious now that since brokers get paid by charging you a commission, whether you make money or not, they have an inherent incentive in not doing all the work that goes along with managing your money.

First, let me preface this by stating that in order to be confident on your own ability to do anything, you must educate yourself  as much as humanly possible in the intricacies of that arena. In order to be confident in your own ability to time the market and make investment decisions without the direct, commission-generating assistance of a broker, you first need to know what makes the market move. Economic indicators, like GDP or monthly unemployment stats, legislative action from the Government, such as Healthcare reform, or tax changes, Interest rate changes from the Federal Reserve, all of these events can have a serious impact on the market. If the news is, or the numbers are in line with what most investors are expecting, the impact is usually positive, and if things happen unexpectedly, the move usually goes whichever way the unexpected news favors. Over time, watching and observing the markets, and watching closely during these times and around these events -among many, many others – you should notice certain patterns begin to emerge. Once you are able to recognize a pattern, making a prediction becomes a lot easier.

The next thing you need to know is how the overall moves in the market can affect the moves experienced in your investments. Do your investments tend to move with the market or against it? Once you know if your assets move with or against the market, you need to determine if they move more, less, or as dramatic as the market moves. (In stocks and finance, this relationship is quantified as the “beta value,” and measures a stock’s volatility in relation to the overall market. A thorough understanding of the underlying information that lies within this single number is essential to being able to accurately predict the short-term or long-term direction of your investments.)

Now once you know what moves the market, and how those moves in the overall market will impact the moves of your investments, you need to know what events that are not specific to the overall market will also have the affect of moving your stocks in any one direction. Earnings announcements, contracts, buyouts, law suits and litigation, all of these and more are big events that are stock-specific, and can have a dramatic impact on where your investments are headed. Not only that, there is an inherent pattern of movement within each stock that is directly linked to the frequency of these events. That pattern can be seen by looking at the stocks chart. Each reversal in movement, every time the stock turns upward after moving down, and vice versa, can pretty much be attributed to either a single occurrence of some event, or a cumulative result from the combination of a few. Good earnings send a flat or down stock upward. Law suits tend to be like cinder blocks wrapped around the ankles of previously rising stocks. A company receives a large unexpected contract, the stock is going up, especially during the next earnings announcement, because that’s when that large unexpected income should hit the balance sheets.

These are just a few small examples of events that occur within stocks, (stock -specific events) that will either send the price significantly higher or lower. Since the legitimacy of that statement for each individual will depend on their definition of the phrase “significantly higher or lower,” I would consider it to be $1 or 2.5% or more in any direction, whichever is greater. A move of $1 is equal to 100% to 2.5% on anything trading between $1 and $40 per share. It’s exactly 2% or less on investments of $50 or more. (That’s the power of a dollar!)

Now that you know what moves the market, what moves your stocks, and you’ve been watching for patterns of how deep the impact on your investments can be based on the occurrence of these events, you need to know how predictions about the market are made in the first place. Tracking various indicators on the chart of a particular investment – volume, moving averages, relative strength, etc. – is the science known as Technical Analysis, and is one way financial “professionals” try to make predictions about the overall markets as well as specific investments. Looking at a company’s balance sheet and analyzing their debt situation, growth numbers over the past and projections for the future, operating and profit margins, etc. and using this company finance data to predict how a company will perform in the overall market is known as Fundamental Analysis. Many people think that these two disciplines clash, and choose to utilize mainly one or the other. I think that’s the hugest, most costly mistake many investors and investment managers make.

In order to successfully make money with your investments, you must maintain excellent awareness of both the technicals and fundamentals, and the changes that occur therein, of any and all investments you make. Why dismiss an entire discipline of information that may certainly prove itself to be valuable when it comes to making money? Knowing and tracking the events that give you an indication of the fundamentals of our economy, combined with the knowledge of those same events and indicators within the specific company’s you are looking at for investments, you will be much more confident and able to analyze information quickly and accurately as it is received, and much more confident in your ability to fire your broker and do this on your own, if you haven’t already. Stay on top of the news, watch the charts, you can even utilize virtual stock trading websites online to test your predictions and trade with fake money to see what would happen without actually risking your own liquidity. Keep learning about the various events and occurrences that can significantly move the markets and your stocks. There are millions of them, so discern which are most important and why. Constantly seek out information that will help you find out how this behemoth system of market finance operates, and always keep building your financial knowledge database. It may sound like a lot of information and may seem daunting to digest it all, but really, how hard is reading and watching? If investors were much more involved in informing themselves, and took more control of their own market-education, a crisis like this, (perhaps even Bernie Madoff), might have been avoided, or at least could have been more mild. Information is Power.

*This post is aimed at investors and anyone that already has funds committed to market investments. Investing in financial products should not be done without thorough research of the markets and products in which you are interested in investing, and at least the consultation of a true professional that you know and trust. As a rule of thumb, take everything you hear or read about the markets or investing with a grain of salt, as most statements about making money in finance will be material conditionals.

Planet Green Provides Solutions

(Vince supports a green planet.)

("Vince" supports a green planet.)

My girlfriend’s mother recently made me aware of a new channel on cable called Planet Green, and I haven’t been able to stop watching! The following information is directly from the planetgreen.com website:

About Planet Green
Planet Green is the first and only 24-hour eco-lifestyle television network with a robust online presence and community. Launched in June 2008, our on-air content reaches 50 million homes, offering more than 250 hours of original green lifestyle programming. Both online and on-air, Planet Green’s content is entertaining, relevant, and accessible to people of all ages and backgrounds. By representing a broad range of ideas and perspectives, Planet Green is taking an active role in generating conversation and motivating individuals to take action when it comes to improving the environmental status of our planet.

Through Time Warner Cable in NYC, Planet Green is channel 114. This addition to cable television is not just an alternative to much of the mindless “reality” shows, and ‘celebrity gossip” dedicated programming that seems to dominate right now, but it’s also extremely educational. Children of all ages will find a wealth of information and inspiration for things from Science Projects to book reports on the issues that will only become more and more relevant, especially for them. Parents may also gain an arsenal of activities in which to participate that may be available in your own neighborhood, for you and your family to take part in helping make your community or your own personal home more sustainable and energy-efficient. It’s exciting to see how easily and creatively people are coming up with the alternatives and ground-breaking answers that can help solve the biggest problems our planet faces today. Not everyone has to be a so-called “green/sustainability/organic fanatic,” but Planet Green does give you the information you need to know that can help you become more efficient, save money for yourself and your family, and make less of an impact on your environment at the same time. We all need to pitch in at least a little. Gold Star for Discovery Communications, Inc. on this one.

Click here to enjoy some clips from Renovation Nation, and other great shows on Planet Green.